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In tariff rate quota: NCC urges China comply with WTO

Forrest Laws Farm Press Editorial Staff | Jan 24, 2003

National Cotton Council officials didn't want to sound like the Grinch who stole Christmas, but they also didn't want another week to go by without expressing their concern about China's compliance — or lack of — with its WTO accession agreement.

That's why the NCC issued a press release shortly before Christmas asking the U.S. government to take steps to insure that the People's Republic of China begin to abide by the trade agreements that were a precondition to its joining the World Trade Organization.

The Council's call for action came right after the U.S. Trade Representative's Office issued its 2002 Compliance Report on China's entry into the World Trade Organization. The report echoed NCC concerns that China was not adhering to its commitments under the WTO in its operation of a tariff rate quota (TRQ) for cotton imports.

The report, NCC Chairman Kenneth Hood said, “confirmed what the National Cotton Council has been saying since May. China is not living up to its market access commitments for cotton. It is restricting access for U.S. cotton while rapidly increasing its cotton textile exports to the United States.”

The USTR report stated that the tariff rate quotas were “operated with only limited transparency” with no specific details on amounts and recipients of the allocations. It also noted that the quota regulations “reserved a significant portion of the TRQs for the processing and re-export trade, despite China's market access and national treatment commitments.”

The report also cited the several instances throughout 2002 where the U.S. government raised these concerns with China, to no avail.

“China's policy is hurting U.S. cotton producers and U.S. textile manufacturers. The U.S. should take steps to insure that China complies with its agreements,” said Hood, a Gunnison, Miss., producer.

In a letter to U.S. Trade Representative Robert Zoellick, Hood noted that the Bush administration had predicted growth in U.S. agricultural exports to China of $2 billion annually by 2005 as a result of the U.S.-China bilateral agreement on China's accession to the WTO and the granting of normal trading status to the People's Republic of China.

“This prediction was undoubtedly premised on the opening of China's markets to U.S. agricultural exports in conformity with international trading rules,” he said. “However, China is not living up to its commitments with respect to trade in cotton fiber.

“Despite repeated entreaties by the U.S. cotton industry, the Department of Agriculture and your agency, China has steadfastly refused to provide true market access for cotton fiber.”

Hood said the Cotton Council initially raised concerns with China's implementation of its tariff rate quota (TRQ) commitments last November. “Our fears were realized when China announced how it would regulate cotton imports under its TRQ in February of this year.

“Despite numerous discussions with Chinese officials by the U.S. cotton industry and by senior officials of the U.S. Department of Agriculture and your office, including Ambassador Johnson, China has announced that it will continue to impose these unfair restrictions on imported cotton fiber during 2003,” he noted. “In direct meetings with U.S. government officials, Chinese officials have stated they will not alter their implementation of cotton tariff rate quotas.”

The NCC chairman said the most serious shortcoming in China's approach is its clear intent to deny national treatment for imported cotton fiber. “China's regulations unfairly restrict cotton fiber imports by requiring that textile products made from the imported fiber be re-exported,” he said.

“If the importing textile mills do not re-export the resulting textile products, they will be penalized by the loss of subsequent quota and by being retroactively charged the over-quota duty rate on the imported products. By implementing the TRQ in this fashion, China has used the WTO Accession Agreement to further increase its cotton textile exports to the United States while shielding its own industry from competition.”

Hood said trade numbers bear out the Council's charges: Through the end of July 2002, cotton textile imports from China were double the amount imported during all of 2001.

“As the system now stands, China, as the largest potential market for cotton fiber exports, continues to protect its domestic fiber market from competition with imports, despite its obligation not to do so,” he said. “By imposing requirements that importers of cotton fiber must export an equivalent quantity of textile products, China is not providing national treatment for imported cotton fiber and is implementing the cotton fiber tariff rate quota in a manner that is inconsistent with the U.S.-China bilateral agreement and with China's obligations under the WTO.”